CROSS COUNTRY HEALTHCARE INC Q1 FY2023 earnings call

• Financial performance exceeded top end of revenue and adjusted EBITDA guidance ranges. - Education had strongest revenue quarter in history with 25% volume increase over Q4. - Physician staffing had increase in days filled across most specialties and improved bill rate mix, organic revenue grew 19% YOY and 7% sequentially. - Position business up 75% YOY with annual run-rate over $150 million. - Home care staffing and interim leadership acquisition ahead of expectations. - Technology initiatives: migrated 25% of managed service program clients onto Intellify, plan to migrate majority over next 12 months, launched per diem and IRP modules within Intellify, anticipate investing nearly $30 million this year on technology-related initiatives. - Headcount investments: leveraged capacity models to balance near-term profitability and long-term growth, scaled down headcount by ~7% since start of year through attrition and performance management.

Nursing reported revenue of $582 million, down 1% sequentially and 24% from the prior year. Travel Nurse and Allied was down 2% sequentially and 27% from the prior year. Local or per diem business revenue was down approximately 10% from the prior year. Education business had the strongest quarter in its history with high double-digit revenue growth sequentially and over the prior year. Home care staffing services had mid-single-digit growth from the prior year. Physician Staffing delivered revenue of $40 million, an increase of 9% sequentially and 75% over the prior year, with organic growth of 19% year-over-year. The position business was up 75% year-over-year and on an annual revenue run-rate of well over $150 million. Education reported a 25% increase in volume over the fourth quarter. Physician staffing organic revenue grew 19% year-over-year and 7% sequentially. Travel business had average bill rates flat sequentially and projected to decline 8%-9% sequentially in Q2, with low to mid single-digit sequential decline expected for Q3 and Q4.

• Second quarter revenue guidance: $530 million to $540 million. - Second quarter adjusted EBITDA guidance: $40 million to $45 million, margin north of 8% at midpoint. - Full year 2023 revenue guidance: at least $2.1 billion. - Full year 2023 adjusted EBITDA guidance: in excess of $170 million, margin above 8%. - Anticipate SG&A to decline in high single to low double digits for second quarter. - Expect further sequential decline in billable hours and average bill rates in high single-digit range for second quarter, further decline in bill rates in mid-single-digit range for Q3 and Q4. - Third quarter expected to be the trough, expect to exit year north of $500 million in revenue with high single-digit EBITDA margin.

• Travel demand has continued to soften throughout first quarter and into second quarter, industry-wide trend. - Market has overcorrected, demand almost lost but expected to start rebound in back half of year. - Churn may increase due to clients evaluating needs and looking for alternatives to save money. - Softness in travel demand impacts volume and bill rates.

Q: Kevin Fischbeck asked about guidance cadence into back half of the year, exit rate, and seasonality of business.

A: Bill Burns and John Martins responded that it's not seasonalized exactly, third quarter expected to be trough, travel nursing and allied orders up 7% and nearly 16% over last several weeks, rebound happening earlier than expected but bill rates may still drop into Q4 due to tail of assignments.

Q: A.J. Rice asked about EBITDA guidance adjustment, order flow visibility, and Intellify rollout.

A: Bill Burns said full year EBITDA guidance adjustment entirely driven by travel side softness, Marc Krug and John Martins discussed order flow visibility with trends up week over week, Dan White talked about Intellify attracting new customers with expansion and capabilities.

Q: Tobey Sommer asked about pricing framework in travel, capture rate in MSP book of business.

A: Bill Burns and John Martins discussed pricing gap between new order open bill rate and locked rate, capture rate with strong relationships and margins improving on bill pay spread, and MSP book of business trends with clients moving to managed models but Cross Country remaining primary vendor with some margin pickup.